Investors’ Preference and Regulatory Aspects in the Indian Derivatives Market

The Indian Stock market undoubtedly experienced tremendous growth in the trading activity in the last twenty-five years. The Derivatives segment of the market began its operations with the launch of Index Futures by the National Stock exchange of India (NSE) in the year 2000. The Derivatives, as a financial product, derives its value from an underlying asset and is primarily designed to reduce the risk which businesses and individuals face due to the fluctuations in the asset prices. It helps individuals and companies to undertake risky projects with high returns and use derivatives as a tool to hedge risk, which can potentially lead to wealth creation. The popular instruments of equity derivatives market are- Forward, Future, Option, and swaps. This paper presents the legal framework and regulatory aspects by the market regulator Securities and Exchange Board of India (SEBI) involving derivatives that is based on the recommendations of the L.C. Gupta Committee. SEBI laid its objectives in regulating derivative markets to ensure transparent trading environment, safety, and integrity